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17. With which of the following regulatory bodies would a publicly traded
company be much more involved than a private company would be?Answers: • SEC

18. Which of the following transactions would have no impact on the
stockholder's equity?Answers: • Purchase of land from the proceeds of a bank loan

19. Which of the following is a flaw with financial analysis?Answers: • Changes in accounting policy can drastically affect the results of a
ratio, making comparison analysis difficult

20. What is historical value?Answers: • The original cost or price paid for an asset

21. Which is the primary financial statement used to measure profitability?Answers: • Balance Sheet

22. What is operating leverage defined as?Answers: • Extent to which variable costs are utilized

23. Which report does a publicly traded company file quarterly with the SEC?Answers: • 10Q

24. If a company using financing has a 60% chance of a $75,000 return under
normal conditions but a 40% chance of a $20,000 return when money is tight and
borrowing costs are higher, what is the expected return for this firm ?Answers: • $53,000

25. What is one caveat when calculating ROA and comparing to other companies?Answers: • Carrying value of assets may be valued differently (historical,
market) by different companies

27. Which ratio would you use to assess a company's ability to pay bills?Answers: • Current ratio

28. In breakeven analysis, if fixed costs rise, then the breakeven point will
__________.Answers: • rise

29. Firm A has a Return on Equity (ROE) equal to 24%, while firm B has a ROE of
15% during the same year. Both firms have a total debt ratio (D/V) equal to 0.8.
Firm A has an asset turnover ratio of 0.9, while firm B has an asset turnover
ratio equal to 0.4. From this, it can be assessed that ______.Answers: • Firm B has a higher profit margin than firm A

30. In 2002, the US passed the Sarbanes-Oxley law which ____.Answers: • was developed in response to the accounting scandals at Enron, Tyco,
WorldCom and others

31. An inventory pricing procedure in which the oldest costs incurred rarely
have an effect on the final inventory valuation is ________.Answers: • Weighted-average

32. What is financial analysis?Answers: • Comparing ratios using numbers from the income statement and balance
sheet

33. Which of the following equations properly represents a derivation of the
fundamental accounting equation?Answers: • Assets - liabilities = owner's equity

34. Accounting scandals of the past 5 years ______.Answers: • resulted in criminal convictions of senior executives at large US
corporations like Enron and WorldCom

35. CAPM formula calculates which of the following?Answers: • Expected return on equity

36. Which of the following is an example of an area of business where use of
"questionable" ethics is considered a necessity?Answers: • None of the statements above is correct

37. The accounting scandals of recent years ______.Answers: • have been dismissed as falling within the latitude of judgment for
applying GAAP rules

38. Which ratio would you use to measure how effectively the firm uses the money
shareholders have invested?Answers: • Earnings per share

39. Which of the following types of firms may operate with high operating
leverage?Answers: • An auto manufacturing facility

40. What is meant by "the goal of the corporation is to maximize shareholder
wealth"?Answers: • Achieve the highest possible value for the firm

41. Which of the following is considered a profitability measure?Answers: • Return on Assets

44. Which is a characteristic of an efficient market?Answers: • Prices adjust rapidly to new information

45. What does Return on Assets indicate?Answers: • How well a company employs its capital investments

46. Which of the following would not be included in a balance sheet?Answers: • Sales

47. Gerald's had opening total stockholders' equity of $160,000. During the
year, total assets increased by $240,000 and total liabilities increased by
$120,000. Their net income was $180,000. No additional investments were made.
However, some amount was paid as dividend during the year. What was the amount
of the dividend paid?Answers: • $60,000

48. Which short-term financing rate always requires the use of international
data?Answers: • LIBOR

49. A company wants to increase its current ratio. Which of the following would
help the most?Answers: • Creating more stringent collection policies to decrease accounts
receivable